Commercial Loan Pricing Market Update: 2021 First Half Review

Since March 2020, we’ve posted regular updates on the commercial loan pricing markets, based on what we’ve seen when examining the PrecisionLender dataset. We look at several popular metrics and point out areas in which there have been noteworthy changes.  

With six months of 2021 now in the rear view mirror, we’ve shifted the focus of this update to take a broader view at trends across the first half of 2021. Increasing volume was the clear focus in the first six months, but – as we’ll show below – that strategy has an impact on profitability.   

If you’d like to see our previous loan pricing market updates, you can find them here.   

If you have questions about metrics that have appeared in previous posts, but not this latest one, please reach out to us at

NOTE: PrecisionLender’s data reflects actual commercial opportunities priced (loans, deposits, and other fee-based business) by more than 150 banks in the United States, ranging in size from small community banks to top 10 U.S. institutions. In addition to their variance in size, these banks are also geographically diverse, with borrowers in all 50 states. 

Upward Trend Continues for Pricing Volume 

Beginning in March, we saw a significant increase in pricing volume. That increased level of activity became the norm over the next four months. Indexing to January 2021 (see note below), average pricing volume is up 25% for the year. June registered the highest numbers of the year, 49% above January’s levels.  

Note: We decided to use this midyear review to change our timeframe for this chart, going back to January 2021 (previously it had been July 2020) and indexing from that month.  

Priced Commercial Loan Volume, by Month

(Indexed to January 2021 = 100)

Larger Deals Are Driving the Growth  

We then looked at growth by bank size, dividing the market into Regional+ (banks with $8B+ in assets) and Community (banks with less than $8B in assets). We found a higher percentage of Regional+ institutions with pricing volume growth (75%) compared to the Community segment (60%).   

Finally, we also looked at deal sizes, and found that the number of larger ($10M+) loans was growing at a significantly faster rate than loans under $10M. It’s a trend we’ve observed since February, as the chart below shows. 

Month-Over-Month Growth in Priced Loans, by Amount 

Loan Sizes Still Growing Across Market Segments 

We also looked at the median loan amount priced at both community and regional+ banks and found increases in both market segments. It’s a trend that, again, goes back to March. It’s also worth noting that this increase in loan size hasn’t produced evidence of increased risk: LTV measures are unchanged at ~70% YTD, and capital allocations and annual loan loss results are also unchanged, at ~9.25% and 25 bps YTD. 

Median Loan Amount 

Indexed to Jan. 2021 = 100 

Banker Pricing Activity Is Up, Across the Board 

As a proxy for banker activity, we measured the number of opportunities priced per banker. Again, we found an uptick beginning around March, and again the upward trend was true for both community and regional+ banks. It’s additional evidence that the growth trend is widespread, across bankers and across market segments. 

Opportunities per Banker

Indexed to January 2021 = 100

Product Mix, Rate Mix, and Renewal Rates Were Static

We theorized that the volume increase would be paralleled by an uptick in payoff/renewal activity. We expected that some product lines – like Construction – would move up, perhaps at the expense of CRE. And we thought we’d see a lower incidence of LIBOR loan pricing, given the impending changes at the end of 2021. But surprisingly, in all three areas – product mix, renewal rate, rate mix – the January charts were nearly identical to what we observed in June.

Fixed-Rate Funding Costs Steepen in One Area, Flatten in Another  

Using the 3-Month LIBOR Swap Curve as a proxy for interest rates and funding costs, we see that fixed-rate COF increased at the end of June in the 12-60 month range (up 11 bps at 60 months), but fell in the 120-360 month range (down 19 bps at 360 months).  

Overall, fixed-rate funding costs have risen across the board since the end of 2020, but in Q2 2021 there’s been a bifurcation – with rates continuing to rise from 24-60 months but dropping from 84-360 months. Meanwhile, floating-rate COF has stayed largely static, as evidenced by the 1-Month LIBOR Swap Curve rates.  

3-Month LIBOR Swap Curve, Selected Dates

What Happened to Profitability in 1H 2021?  

While it was clear that volume was the focus in the first half of 2021, we wanted to see what effect, if any, this approach has on profitability. To do this, we examined spread trends for fixed-rate as well as Libor- and Prime-based floating-rate loans.

As you'll see below, fixed-rate spreads have been hit the hardest, LIBOR spreads have been negatively impacted in the Regional+ segment, and Prime spreads are largely unchanged. 

Widespread Fixed-Rate Concessions 

No one who has followed our updates throughout 2021 will be surprised by the fixed-rate findings. Since December 2020 both median (-49 bps) and weighted (-56 bps) spreads dropped considerably. Overall, this ~50 bps drop costs about $5 million per $1 billion assets.  

Overall Fixed-Rate Spread Trend

(37-60 Months)

We went a level deeper on fixed-rate spreads, looking at their performance at community banks and at regional+ banks. Concessions occurred across the board, but were greater at regional banks.  

Prime Spread Performance Varies by Segment 

Overall, spreads on prime-based loans have stayed steady, with only a slight down tick in average spreads in June.  

Overall Prime Loans, Spread Trend

The story changes though, when comparing prime spreads at community banks to those at regional+ banks. Both the average (+15 bps) and weighted (+7 bps) spreads actually increased at community banks, while both dropped (-17 bps for weighted spreads and -30 bps for average spreads) at regional banks. (Note: We plotted average spreads here because median spreads were unchanged for both segments).  

LIBOR Spreads Down at Larger Banks, Unclear at Smaller Institutions 

Finally, we looked at spreads on LIBOR loans. Overall, weighted spreads were down 16 bps, though the median spread was largely flat in 2021, dropping down 4 bps in June.  

Overall, LIBOR Loans, Spread Trend

As with Prime spreads though, the story varied by segment. LIBOR median spreads at Regional+ banks were essentially flat, while weighted spreads fell by 19 bps in the first half of 2021 (A similar story to the overall trend). But at community banks, weighted spread performance was erratic, to say the least.  

Got Questions?   

Our banking consultants and data scientists are combing through PrecisionLender pricing data every day. If there is anything you’d like to know about what they’re seeing, please send along your questions to  



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